ExchangeRates.org.uk - At the time of writing the GBP/USD was trading at around $1.3209, down roughly 0.3% from Tuesday’s opening levels. The Pound (GBP) struggled to garner investor attention on Wednesday as a lack of notable data releases coupled with concerns over the UK’s economy stifled Sterling’s trade. This came a day after UK Prime Minister Kier Starmer delivered a speech where he warned of a ‘painful’ upcoming UK budget, hobbling GBP exchange rates in the process.
Starmer commented: ‘I will be honest with you, there is a budget coming in October and it’s going to be painful. Just as when I responded to the riots, I’ll have to turn to the country and make big asks of you to accept short-term pain for long-term good. The difficult trade-off for the genuine solution.’
Further undermining the Pound on Wednesday was an uncertain market mood. As an increasingly risk sensitive currency, unclear trading condition further weighed on the British currency.
US Dollar (USD) Firms despite Absence of Data
The US Dollar (USD) experienced a modest recovery on Wednesday following a substantial USD sell off on Tuesday, where the American currency traded at multi-year lows against its peers. Following Federal Reserve Jerome Powell’s speech on Friday where he all but confirmed the Fed would begin unwinding its monetary policy in September, USD slumped. However, moving into Wednesday, economists began to speculate that the US currency could have entered into oversold conditions as a result of a slew of dovish Fed comments, lifting the ‘Greenback’ as a result.
Francesco Pesole, FX strategist at ING, explained: ‘After all, the OIS pricing for 100bp of easing by year-end means markets are positioned for a soft landing paired with no more inflation bumps. And while Powell’s explicit rate cut guidance has some significance, investors had fully priced in easing well before Jackson Hole and the negative USD reaction to the speech looked a bit overdone from the onset.’
GBP/USD Exchange Rate Forecast: US Data in the Spotlight?
Looking ahead, the primary catalyst of movement for the Pound US Dollar exchange rate this week is likely to be the publication of a number of data releases from the US. Up first will be the publication of the US’s second GDP estimate for the second quarter of the year. As the data is expected to show a healthy 2.8% expansion, USD could edge higher. Following on from the GDP data, the US will release the Fed’s preferred gauge on inflation, the core PCE price index, on Friday. The index is forecast to fall from 2.7% to 2.6% and could further ramp up Federal Reserve interest rate cut bets and see the ‘Greenback’ close the week on the back foot. Turning to the pound, UK data will be mostly absent for the remainder of the week, and could see GBP exchange rates continue to trade without a clear direction.
This content was originally published on ExchangeRates.org.uk
